Nordstrom, Inc. closed on its previously announced offering of a 250 million dollar aggregate principal amount of its 2.300 percent Senior Notes due 2024 and a 425 million dollar aggregate principal amount of its 4.250 percent Senior Notes due 2031.
The company will use the net proceeds from the sale of the Notes, together with cash on hand, to redeem in full the 600 million dollar aggregate principal amount of outstanding 8.750 percent Senior Secured Notes due 2025, which were issued in April 2020 during the onset of the COVID-19 pandemic. The redemption price for the 2025 Notes is equal to 100 percent of the principal amount plus accrued and unpaid interest, including a “make-whole” premium. The redemption date for the 2025 Notes is April 24, 2021.
As a result of this redemption, the company’s bond portfolio once again will be entirely unsecured, and the real estate used to secure the 2025 Notes will be fully unencumbered.
Together, these transactions will reduce annualized interest expense by approximately 30 million dollars, beginning in the second quarter of fiscal 2021. Interest expense in the first quarter of fiscal 2021 will include charges of approximately 90 million dollars, primarily related to the “make-whole” premium and unamortized issue costs associated with the 2025 Notes.
The closing of the offering will also create flexibility for additional de-leveraging with the 2024 Notes, which includes a par-call feature beginning in April 2022. Nordstrom remains on track to reduce its leverage ratio to approximately 3x by the end of 2021 and 2.5x by the end of 2022.
“This pandemic presented us with unprecedented challenges. After the health and safety of our employees and customers, our priority has been to ensure the long-term financial success of the company,” said Anne Bramman, chief financial officer of Nordstrom, Inc, in a statement. “We’re pleased with the progress our business has made in recovering from the impacts of COVID-19 and are optimistic about our future growth opportunities. With the completion of this refinancing, we are further strengthening our financial position. This is an important milestone in our return to targeted leverage ratios and an investment grade capital structure.”
Image: Nordstrom Press Room